New life for City 'pit trading'

THEY were the finger-waggling, armjerking, loud-jacketed, hard-working, harder-drinking epitome of the 1980s City boom - and now they are back.

When the International Petroleum Exchange closed its trading pit in April, the sun appeared to be setting on physical trading in the Square Mile.

The IPE was following financial futures exchange Liffe and the London Stock Exchange, which had both done away with pit trading and embraced screenbased dealing. Only the London Metal Exchange retains an open ring and a few face-to-face traders.

But trading on the oil markets will be in full cry again today as Nymex, the New York Mercantile Exchange, opens a trading pit on Finsbury Pavement in the City, with room for up to 100 of those multi-coloured jacketed traders.

Open outcry pits can offer a more liquid marketplace than electronic trading, said Nymex Europe chief executive Sam Gaer.

'Open outcry traders can react quickly to apparent shifts in market sentiment by seeing at first hand the ebb and flow of activity on the floor, both physical and transactional, taking advantage of visual and aural feedback they cannot get from a computer screen,' he added.
'This is not about open outcry versus electronic - it's about what the customer wants.'

But Nymex's decision to ask the Financial Services Authority for permission to open an alternative Brent crude futures market in London means a farfrom-pleasant rivalry with the IPE.

When the IPE controversially decided to drop pit-trading, throwing into question the futures of dozens of traders, Nymex last November launched an alternative pit floor in Dublin, aiming to attract those disaffected traders. But after a bright start, the operation has dwindled.

'The Dublin trading floor was a good short-term solution for open outcry traders and clerks who were in danger of losing their livelihoods,' said Gaer.

'More than 120 traders have registered to trade in London. The trading floor can accommodate 100 traders and their support staff - as many as 250 jobs returning to the London financial district.'